New Jersey’s bulk sale law was enacted by the New Jersey legislature in 1995 to protect purchasers of business assets. The purchaser of business assets is required to notify the New Jersey Division of Taxation of the transaction at least ten days before the sale by completing and filing a form C-9600 along with a copy of the contract for sale. The form C-9600 must be sent by certified mail to the State of New Jersey, Division of Taxation, Attention: Bulk Sales Section, P.O. Box 245, Trenton, NJ 08695-0245, or it can be sent by overnight mail to the State of New Jersey, Division of Taxation, 50 Barrack St, Trenton, NJ 08695, Attn: Bulk Sale Section. There is no fee for filing the form.
The New Jersey Division of Taxation then has ten business days to research and determine what amount of money must be held in escrow by the purchaser’s attorney at the closing. The state tax liabilities of the seller are then paid from the escrow. A purchaser, by complying with the Bulk Sale Law, ensures that they will not become responsible for the seller’s New Jersey tax liability. After the tax payments requested by the state are paid, the Division of Taxation will issue a tax clearance letter which authorizes the release of any monies remaining in escrow. Upon receipt of the tax clearance letter, the balance of the monies held in escrow can be released to the seller. If the Division fails to respond to the C-9600 within ten business days of receipt of same, the purchaser will not be held responsible for the seller’s state tax liabilities.
If the purchaser fails to notify the New Jersey Division of Taxation of a sale which is subject to the bulk sales notification requirements, then the purchaser becomes liable for the New Jersey State tax liabilities of the seller if the seller does not pay. If the purchaser fails to notify the state, the Division of Taxation can file judgment, levy and seize the purchaser’s assets. However, if the seller refuses to cooperate with the Division of Taxation, the Division will not penalize the purchaser for the seller’s refusal. While complying with this law is an added step in the purchase of a business, it is an excellent mechanism for protecting the purchaser. Purchasers of business assets should insist on compliance with the terms of the New Jersey Bulk Sales Law. It is an essential term of any contract for sale of business assets.
Certain transfers are not subject to the bulk sales notification requirements: transfers of real estate (single and two family residences) which are sold by an individual, estate or trust; transfers which are in the ordinary course of the seller’s business; stock transfers which are not accompanied by a change in the business structure; and transfers pursuant to a sheriff’s sale.
If you are purchasing or selling assets subject to the New Jersey bulk sales notification requirements, the attorneys at McLaughlin & Nardi, LLC can ensure that you are protected from assuming the seller’s state tax liabilities. Call one of our attorneys at 973-890-0004 or e-mail us.